In a case involving three related contracts, only one of which contained an arbitration agreement, the Ninth Circuit has held that incorporation of the rules of the International Chamber of Commerce (ICC) into an arbitration agreement constitutes clear and unmistakable evidence of delegation of arbitrability to the arbitrator. The first contract was one between Portland General Electric Company (PGE) and a contractor to build a power plant. It required the contractor to obtain a performance bond, which was issued by two insurers (the Sureties). Neither the construction contract nor the bond contained arbitration provisions. The construction contract also required the contractor to obtain a guaranty of performance from Abengoa S.A. Abengoa issued a guaranty to PGE, under which Abengoa and PGE agreed to submit any disputes to arbitration conducted by and under the rules of the ICC. The guaranty further stated that once arbitration commenced, either party could implead or raise any claim against any other entity, provided the claim arose out of or in connection with an agreement with a subcontractor or the guaranty.
Subsequently, PGE declared the contractor in default and terminated the construction contract, prompting Abengoa to file a request for arbitration with the ICC, naming PGE as respondent and the contractor as an impleaded party. Abengoa then moved to join the Sureties in the arbitration. The Sureties denied liability under the performance bond, and PGE sued them in federal court and moved to enjoin them from arbitrating their claims against PGE. The Sureties argued that PGE had expressly agreed in the guaranty that the ICC tribunal would decide whether Abengoa could join the Sureties and for what purposes, but the court granted PGE's request for a preliminary injunction and refused to stay the litigation.
On appeal, the Ninth Circuit disagreed, finding that the parties, by agreeing to arbitration under the ICC Rules, had delegated the authority to decide the "gateway" questions of arbitrability at issue because the ICC rules expressly vest arbitrators "with the authority to determine questions of arbitrability." The Ninth Circuit thus vacated the District Court's order, concluding that the litigation must be stayed while the tribunal determined whether PGE was required to arbitrate its claims against the Sureties.
Portland Gen. Elec. Co. v. Liberty Mut. Ins. Co., No. 16-35628 (9th Cir. July 10, 2017)
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